A.1. Part I – Acquisitions

(1) Acquisitions of timber, timber-cutting contracts, or forest land should be

detailed in Part I. This section provides a format for recording costs associated with such acquisitions and for allocating total purchase costs to appropriate capital assets. For purchased forest property, the total amount to be allocated is the actual cost including legal fees, etc. For inherited property, the estate's value is allocated to the assets.

(2) The asset categories included in Part I are forested land, other unimproved

land, improved land, timber, pre-merchantable timber, improvements, and mineral rights. Costs are allocated to the respective accounts according to the relative values of the assets at the time that the property was acquired. A forester can help to establish relative values and to determine allocations.

(3) The pre-merchantable timber account should consist of sub-accounts for

young growth (naturally occurring trees of pre-merchantable size) and plantations (trees planted or seeded). Plantation accounts are generally referred to as deferred reforestation accounts. Each of the timber accounts should include entries reflecting a unit of measure (such as board feet for merchantable timber and acres for pre-merchantable timber) and value. A reasonable amount of the basis should be allocated to the pre-merchantable sub-accounts if they contribute to the overall value of the property. The quantity and value of all merchantable timber at the time of acquisition should be entered into the timber account. To verify the taxpayer's basis, review the taxpayer's documentation, which should include items such as property maps, timber cruise information, a forester's appraisal, etc.